Preparing for STP Phase 2 Reporting Changes in QuickBooks
QuickBooks users transitioning to Single Touch Payroll Phase 2 face new disaggregation rules for gross earnings and updated pay category mappings.
QuickBooks users across Australia are navigating a significant shift in payroll reporting as Single Touch Payroll Phase 2 takes effect. The Australian Taxation Office’s expanded reporting framework demands more detailed breakdowns of employee earnings, and the changes touch nearly every pay category in the system. We walk through what is changing, what stays the same, and how to prepare your file.
Carry-over from Phase 1
Several core payroll processes remain unchanged under Phase 2. You will still lodge pay and update events the same way you always have. The due dates for lodging those events have not shifted. The types of payments you report, along with your tax and super obligations, carry over from Phase 1. The end-of-financial-year finalisation event requirements also remain as they were. If your current workflow feels comfortable, that part of the process will not need relearning.
New reporting requirements
The central change in Phase 2 is the disaggregation of gross income amounts. In Phase 1, you reported year-to-date gross income as a single figure through pay and update events. Phase 2 breaks that figure into distinct components so other government agencies can assess income more accurately.
The Department of Social Services, Services Australia, and the Department of Veterans’ Affairs all assess income differently. By separating out the individual pieces of gross earnings, the data you send becomes more useful to each agency. Social services agencies operate on specific fortnightly instalment periods, and the more precise reporting helps ensure recipients get the correct payment at the correct time.
Beyond gross income disaggregation, Phase 2 also introduces reporting for employment and taxation conditions, child support garnishees and deductions, income types, and country codes. These additions streamline how employer and employee data flows between the ATO and other government bodies, and they reduce some of the admin tasks tied to hiring and terminating employees.
The breakdown of gross earnings
The following components of gross earnings must now be reported separately:
- Allowances
- Bonuses and commissions
- Directors’ fees
- Overtime
- Paid leave
- Salary sacrifice
Salary sacrifice deserves special attention. In Phase 1, you did not need to report salary sacrifice amounts at all. Phase 2 makes it a requirement. The gross amount you report must be the pre-sacrificed figure, not the reduced amount that appears on the employee’s payslip.
Pay category mappings
QuickBooks has mapped common pay categories to the correct Phase 2 payment classifications. Here is how the system handles them:
- Annual Leave Taken maps to Leave - other paid leave
- Bonus maps to Bonuses and commissions
- Casual overtime at 125% maps to Overtime
- Casual overtime at 75% maps to Overtime
- Community Service Leave Taken maps to Leave - ancillary and defence leave
- Compassionate Leave Taken maps to Leave - other paid leave
- Long Service Leave Taken maps to Leave - other paid leave
- Permanent overtime at 100% maps to Overtime
- Permanent overtime at 50% maps to Overtime
- Personal/Carer’s Leave Taken maps to Leave - other paid leave
These mappings mean the system handles much of the classification work for you. You should still review your own pay categories to confirm they align with the correct reporting categories, especially if you have customised your setup.
Preparing your file
If you have installed a pre-built Award in QuickBooks, check the Payroll Settings section for the most recent update. Award updates often include the latest Phase 2 classifications, and running the update ensures your pay categories map correctly from the start.
Review each pay category in your file and verify its payment classification. Pay particular attention to any salary sacrifice items, since these now require reporting and must reflect the pre-sacrificed gross amount. If you have created custom pay categories, confirm they map to the right Phase 2 classification rather than relying on a default.
Run a test pay cycle after making your changes and review the figures before lodging. Comparing the disaggregated totals against your previous gross income reports can help you spot any misclassifications early.
Finding further guidance
The ATO publishes detailed guidance on STP Phase 2 reporting requirements on its website. Intuit also maintains resources within the QuickBooks help centre for Australian payroll users. If your file has complex pay structures or you are unsure about a particular classification, consider reaching out to a registered tax agent or BAS agent who understands the new framework.